German business rebound breaches gloom

Updated 24 November 2012
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German business rebound breaches gloom

BERLIN: German business confidence halted a six-month slide to stage an unexpected rally in November, data suggested yesterday, despite a somber overall economic climate due to the euro zone crisis.
The head of the Ifo economic think tank, Hans-Werner Sinn, said that the business climate had brightened slightly after six falls in a row which had seen business confidence slump to a two-and-a-half-year low in October.
"Companies expressed slightly greater satisfaction with their current business situation," he said in a written statement.
"They were also far less pessimistic about future business developments. The German economy is holding up in the face of the euro crisis," he said.
Germany has the biggest economy in Europe and the strength of business activity there is critical to trade and activity in the debt-stricken euro zone, and also throughout the wider European Union.
European stocks markets steadied and the euro rallied after the German data emerged.
On Thursday, a key leading indicator, the Markit PMI composite index published in Brussels, put the index for euro zone private sector activity at 45.8 in November from 45.7 in October, the lowest since June 2009.
Analysts said that this pointed to an "alarming" slowdown and possibly that the euro zone would dig into recession in the fourth quarter of the year. 
But the news from Germany on Friday coincided with a slight lifting in France's industrial gloom.
French industrialists gained some confidence in November about their business outlook, according to the official statistics institute INSEE, after plunging in October into the deepest gloom since the middle of 2009.
However France's private sector activity fell in November for the ninth month in a row, albeit less than it had for three months, according to the Markit PMI leading indicator released on Thursday.
"Although the contraction of activity is slowing a bit in the French private sector in November, the new marked drop in new business shows a still fragile economy" in France, Markit economist Jack Kennedy said in a written statement.
France's economy has been stumbling along at almost zero growth for about a year but in the last quarter rallied to show a gain of 0.2 percent, the same level as in Germany where the economy had been resilient but has been hit by a slowdown in business activity.
Germany's economy slowed to 0.2 percent growth in the third quarter of 2012 as the euro zone crisis took its toll, final official data showed yesterday. That compared to growth of 0.5 percent in the first quarter and second-quarter growth of 0.3 percent.
The Ifo economic institute's closely watched business climate index rose to 101.4 points in November, back to its September level, from 100.0 points a month earlier, contrary to analysts' expectations.
Analysts surveyed by Dow Jones Newswires had anticipated the indicator slipping to 99.5 points.
However economists at Capital Economics saw no reason for overall optimism.
"The unexpected rise in November's German Ifo survey did little to alter the big picture of near-stagnation in the euro-zone's 'growth engine'," they said in a written note.
Christian Schulz, of Berenberg bank, was also cautious.
"Although the Ifo points in a better direction, a degree of caution is warranted," he wrote.
"Business confidence in the most important sector, manufacturing improved only slightly and stays negative on balance.
"The strongest increase was reported for the volatile wholesale trade sector, the only sector where optimists now outnumber pessimists," he added.
Ifo calculates its headline index on the basis of companies' assessments of their current business and the outlook for the next six months.
The sub-index measuring current business also rose to 108.1 points in November, and the outlook sub-index rose to 95.2 points.
Unlike many of its neighbors, Germany has shown strong resistance to the debt crisis that has swept through the 17-country euro zone, relying on its powerful export motor to keep the economy humming.
However signs have appeared that Europe's top economy is starting to feel the pinch.
The Organization for Economic Cooperation and Development warned earlier in the month that the euro zone economy was slowing further, with the possible exception of Italy.


Chinese smartphone maker Xiaomi lowers target as it kicks off IPO

Updated 42 min 10 sec ago
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Chinese smartphone maker Xiaomi lowers target as it kicks off IPO

HONG KONG: Chinese smartphone maker Xiaomi kicked off its initial public offering Thursday but the firm is likely to pull in about $6.1 billion, far less than originally expected, with investors having mixed views about its main business.
Xiaomi had hoped to raise $10 billion with the Hong Kong IPO, making it the biggest since Alibaba’s $25 billion New York debut in 2014 and valuing the company at about $100 billion.
However, the firm is offering 2.18 billion shares at HK$17-HK$22 apiece, according to Bloomberg News, which values it at about $53.9-$69.8 billion.
Xiaomi had hoped to be the first company to list shares in Hong Kong at the same time as launching new Chinese Depository Receipts (CDRs) in Shanghai under new rules announced in April by mainland authorities to open up markets in the world’s number two economy.
But on Tuesday it put off its decision on listing the CDRs until it completes its IPO in Hong Kong. The China Securities Regulatory Commission said it has canceled a listing review originally scheduled for June 19.
This delay, as well as differing market views about Xiaomi’s business model, were also among reasons for the lower valuation.
CEO Lei Jun claimed it was an Internet services company making money via online games and advertisements despite 70 percent of its revenues coming from selling hardware, particularly smartphones.
The firm, which mainly sells cheap but high-quality smartphones in China, is looking to push into Europe — recently opening its first flagship store in Paris — as the home market reaches saturation point.
China Mobile and US wireless-chip giant Qualcomm are among the cornerstone investors and it is expected to list on July 9.
Chinese authorities devised the CDR program, under which homegrown companies listed abroad can simultaneously list at home, after watching technology heavyweights Alibaba and Baidu list on Wall Street.
The objectives of the plan include helping to develop China’s still relatively immature and volatile share markets while allowing domestic investors to invest in the country’s big tech champions.
Alibaba and Hong Kong-listed Tencent have expressed an interest in the plan.
Xiaomi shipped 28 million smartphones worldwide from January to March, an 88-percent surge year-on-year.
That was fourth in the world after Samsung, Apple and China’s Huawei, according to figures from the International Data Corporation.